4 Things To Know Before Investing In Gold

Since the global economy changes from time to time, many people are finding ways to protect wealth and ensure that investments don’t lose their value over time. And for many finance experts, gold is still a worthy investment to consider. Gold is a precious metal known for its value and ability to provide financial stability. It has been considered as a symbol of wealth throughout the years.

However, just like other forms of investments, buying gold comes with benefits as well as potential risks. Because of this, it’s important to conduct careful research about this precious metal before making a financial decision. 

If you decide to invest in gold, below are four things you must know before officially starting that investment journey:

1. There Are Different Types Of Gold Investments 

As mentioned, gold has become a popular investment for many people. Thus, if you decide to invest in this hot commodity, you should know that there are various types of gold investments to choose from. Depending on your needs, budget, and goals, you can choose from the following types of gold investments:

  • Physical Gold: This can be in the form of gold bullions, coins, and jewelry. The good thing about this investment type is that it allows you to have direct ownership and it can be held in your possession for a long time. 
  • Gold Mutual Funds: This can be a great way to invest in gold without physically owning the metal. However, an investment in gold mutual funds can be costly due to high annual charges, management fees, there may be also hidden charges. 
  • Gold Mining Stocks: This type of investment doesn’t involve physical gold, but you will be investing in gold mining companies Also, when choosing to invest in gold mining stocks, take note of their broader risk tolerance. 
  • Gold Options And Futures: These are gold investment derivatives that involve short-term speculation on future gold prices. But, if you want to invest in options and futures, you need to be a more experienced investor since they’re also risky.

2. You May Pay A Premium When Purchasing Gold

Aside from paying for the purchase price of gold, you may also be asked to pay a premium if you decide to invest in it. A premium refers to the additional cost of gold bullion that’s beyond and above its market value. The purpose of the premium is to pay for storage costs and handling fees for the gold bullion.

Hence, the total price of your initial investment may vary depending on several factors such as supply, demand, and inflation. And just like how much is a quarter worth when investing in silver, the price of gold bullion is also determined by its weight. To know how much you need to recoup in the future, you must compute all potential costs before investing in this precious metal. 

3. You Need Proper Storage If You’re Investing In Physical Gold

Typically, many people view physical gold as a profitable and safer investment. This type of gold investment has gained popularity because it can be quickly converted into cash. However, when you buy physical gold and store it long-term, you need to know how to properly keep them in good condition.

While you may consider keeping them at home, it may not be a good idea as they may be easily stolen by someone else. Therefore, you may choose to place these valuable commodities in safety deposit boxes and banks. You can also choose to store them in a storage facility with the right security and protection features that can keep them safe at all times.

4. Tax Rates May Vary 

So, why invest in gold rather than other assets? For some people, it’s because of better (or lower) tax rates. However, it’s essential to note that the tax would vary depending on the type of gold investment you chose. For instance, when you put your money in gold stocks, you will be charged either 10 to 15% of capital gains tax if you sell your shares.

However, when you purchase gold bars and coins, you may be paying a considerable amount of taxes when you sell them. This is because physical gold is considered collectibles, which are taxed at the collectibles capital gains rate that could go as high as 28%. Because of this, it’s best to talk to a financial advisor that can give you insights on which type of gold investment matches your goals and risk appetite. 

Takeaway

Like any investment, you’re still exposed to different risks of loss when you invest in precious metals, including gold. This is especially true if you don’t do your research, or if you fail to explore more information about this precious metal. Luckily, through the things discussed above, you’ll be able to reduce potential risks, make sound investment decisions, and receive positive returns in no time. 

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